You issue interest notes to debtors with overdue payments or to debtors who have paid their debts too late.
You process interest notes in three steps:
- The system creates a proposal of interest notes to issue according to your selections. You can print a control list showing the contents of the proposal.
- You maintain the proposal, and print new control lists until you are satisfied with the proposal.
- You print the interest notes, and the system updates the Accounts Receivable and the General Ledger with the new transactions.
Note: Only one user at a time can run the routine, and only one proposal can be active.
Calculations
Interest
The system calculates interest based on started day, started week, started month, or a fixed rate. The calculation per started day can use either a year with 360 or 365 (366) days as a basis, but all other methods use 365 (366) days.
When you calculate interest for an invoice the total invoice amount is split into two parts:
- Settled amount
- Remaining amount
These are the bases for separate interest calculations and they are independently controlled on Document type level by values you can set in the Interest/Paid and Interest/Open items fields.
Settled amount
Interest based on settled amount consists of interest amounts charged for each payment that partly settle the invoice after its due date. The period for the interest amount calculation starts with the day after the invoice due date or after the last updated interest calculation date. It ends with the payment date or the calculation date, if the Interest handling code in the A/R control file is 2 or 3 and the payment date is after the calculation date.
This interest will not be calculated if the Document type for the invoice has the Interest/Paid field value set to 0 in Work with document types.
The interest note will cover the period from the due date until payment date.
If you charge interest per started week or month, the system calculates the number of started periods for this period.
Remaining amount
Interest based on remaining amount is charged for the none-settled amount of the invoice at the calculation date, for the time period starting from the day after the invoice due date and ending with the interest calculation date.
Note: The interest will not be calculated if the Document type of the invoice has the Interest/Open item field value set to NO in Work with document types.
The first interest note will cover the period from the day after due date until calculation date.
If you charge interest per started week or month, the system calculates the number of started periods for this period.
If charged per day, the following interest note will cover the period from the day after last calculation date until the new calculation date.
If charged per week or month, the following interest note will cover the period from the day after the ending date of previous interest period until the new calculation date.
Exchange rate
The system retrieves the exchange rate to use when calculating the interest amount according to the default period and level defined in the A/R control file, based on the calculation date. If you activate or inactivate documents during maintenance of the proposal, the system will recalculate the exchange rate based on the actual date. If the exchange rate is missing, an error message will be printed on the control list, and you will not be able to update the proposal.
Coin adjustment
You can use coin adjustment on customer/currency level if the Adjust inv amount field in Work with currencies is completed.
Accounting
The system automatically creates the G/L postings for the interest notes. The control account and contra account postings are based on the accounting rules you set up for the document type connected to system document type IND.
The coin adjustment is posted to the XDC pseudo account.
If you use the system defaults for document type IND, the system uses the following pseudo accounts to retrieve the proper General Ledger accounts:
| Pseudo | Variable | Description | D/C |
|---|---|---|---|
| XDDEBaa | A/R group | Control account | D |
| XDIcccc | Transaction currency | Invoiced interest | C |
If you change document type IND, and use other pseudo accounts, the control account variable must still be the A/R group. The contra account variable may, however, be the document type, transaction currency, A/R group or voucher type.
If the pseudo accounting does not result in valid accounts, an error message will be printed on the control list, and you will not be able to update the proposal.
The accounting for coin adjustment is the same as for interest notes except for the following:
| Pseudo | Variable | Description | D/C |
|---|---|---|---|
| XDDEBaa | A/R group | Control account | C |
| XDCcccc | Transaction currency | Coin adjustment | D |
If the pseudo accounting for coin adjustment does not exist you will receive interest notes without coin adjustment.
Enquiries and printouts
You can follow up on both the interest note documents and the G/L postings that the system creates when you update the proposal.
- A/R transaction enquiry – displays all interest notes. Enter the document type for interest notes to display the documents.
- Balance enquiry – for enquiries on the accounts used when posting the invoiced interest.
- Interest note control list – showing the invoices included in the proposal, with date ranges for interest calculation, as well as interest percentages and amounts. The Interest control list also displays actual amount/currency and coin adjustment amount/currency.
- A/R interest note journal – showing details for the created interest notes.
- Interest notes – one per combination of debtor and currency (for sundry debtors, there will be one interest note per transaction).
If the system should update the General Ledger immediately, the system will also print the G/L journals.
You can use the A/R transaction list to print details for interest notes. Use the selection parameter document type.
You can use the G/L transaction list and the reports from IBS Report Writer to print details for the accounts used when posting invoiced interest.